Imagine this situation. We enter the bank, apply for a loan and it is approved in a very short time. No stress, no fear of refusal – a few days and money is already in our account. Does this sound great? This is how a potential customer imagines the process of obtaining a loan. In practice, there is a good chance that this will not happen, and instead we will be cleared away from the bank. At least because of low creditworthiness, bad credit history or for another reason.
The reasons can be quite a lot and even a bank advisor does not always know why. Customer credibility, i.e. scoring is a common reason for refusal. This is influenced by the customer’s education, marital status, etc. In fact, a bank adviser is not obliged to inform us what is the real reason for refusing a loan. However, there is a solution to this problem.
The answer to how to increase your credit is a Loan or credit guarantee from the guarantor em. What are they What are the differences between them and who should use them?
What is a loan with a guarantor and a loan with a guarantor?
A loan with a guarantor and a loan with a guarantor are financial products the granting of which requires the accession of a third party commitment, called a guarantor or guarantor, and occasionally also a resident. A guarantor can be both a family member or a friend or acquaintance, or even a completely stranger. The only requirement that will generally be imposed on her is exceeding a certain income threshold or having sufficient creditworthiness, but each bank or loan company may also have additional conditions (e.g. regarding age). A good active credit history is also important for the guarantor. It would be ideal if the resident had a bank loan or credits and repaid them on time, for at least six months. BIK’s score is then already calculated. BIK – for the uninitiated it stands for the Credit Information Bureau. Our entire credit history is shown there. When talking to advisers, there’s no point in hiding information about our credit history. The bank will see everything based on the BIK report.
When we become insolvent and the creditor cannot count on receiving the amount due from us, it will be possible to contact the guarantor. He will be jointly responsible for repayment of the loan or credit, even if he has not received any part of the money borrowed and has not yet participated in repayment of installments. The guarantor should be aware of the risk that he may repay a loan he did not actually take out if the borrower defaults. Becoming a guarantor is therefore a very big responsibility that should not be taken on without first thinking over this decision. A loan with a guarantor is a very profitable solution for the borrower, but potentially a problematic one for the guarantor.
Are loans and credits with a guarantor profitable?
First, ask yourself the following question: why do banks and loan companies impose such high interest rates on their financial products, and also charge them with other additional costs? The answer is simple. The borrower does not meet the conditions for obtaining a loan, so the risk of lending to such a person is high, so you need a guarantor. The bank does not assume that the borrower will not repay the loan. But such a risk exists and must take it into account. The question is whether such a loan will help or harm the borrower in the long run.
Why are traditional loans so expensive and so hard to get them?
It can be said that the bank charges such high fees simply to earn. This is not a charity. This is of course true, but depending on various factors, loans can be more expensive or cheaper in the same place. In many cases, we can lower the interest rate on a loan, even if we decide to buy insurance or open an account in a given bank. Often, the bank’s offer depends on the scoring, which we discussed above. Based on the scoring, the bank often has specific loan conditions. According to the rule, the worse the rating, the more expensive the loan.
Banks and loan companies, contrary to appearances, are willing to grant loans on terms that are profitable for the customer. It is worth mentioning, however, that such conditions are usually given to borrowers who are reliable for the bank, i.e. those with a very good history in BIK. In special cases, they have the option of negotiating the terms of the loan, as they have a low risk of defaulting on the loan. In other cases, the risk of lending is much higher. Considering how many Poles have problems with timely repayment of installments of their liabilities, it is not surprising that financial institutions do not want to suffer losses because of it.
It is because of this risk that so often it turns out that credits or loans are expensive, completely unprofitable or simply will not be granted to us at all. Fortunately, however, this risk, and therefore the associated additional costs and fees, can be minimized. The bank, which has acquired another satisfied customer in a safe way, and the borrower who received the dream loan on terms that are profitable for him benefits from it.
Loan or credit with a guarantor – a way to make good payments
As already mentioned, the guarantor of such credit or loan is liable if the person making the commitment is unable to pay it back. The guarantor must therefore be aware of this risk and the consequences it may incur. This is a salvation and additional security for the bank when the customer stops paying the next installments. Instead of one person from whom he can collect the payment, he has two or even more (depending on the institution and the given offer, sometimes more than one guarantor is admitted). There is a much greater chance that in one way or another the debt will be repaid, and in a shorter time and with fewer problems. And thus, without additional costs for both the bank and the borrower. It is also good for the customer – thanks to the fact that with the help of a girrant the risk of granting a loan is smaller, he can count on more attractive conditions.
Who can use a loan or credit facility with a guarantor?
Financial obligations guaranteed by a third party are therefore a perfect solution for those who otherwise could not count on a loan or only a small amount and on unfavorable conditions. If we repay the debt in a timely manner, neither our guarantor nor we will feel any negative effects of opting for such a way of securing the credit or loan.
So taking a Loan or credit with a guarantor is a good option for almost everyone. Even if we have sufficient creditworthiness and a positive credit history, it may turn out that thanks to the guarantor it will be possible to negotiate even more profitable conditions or a higher amount. However, it should be remembered that in this way we expose the giraffe to potential unpleasantness if something happens and we are unable to pay the liability on time. And here comes the most important problem, often impossible to overcome – finding a guarantor. People today are often very risk-conscious and are reluctant to borrow. There are even clients who can be the guarantor, but they want to be sure that in the absence of repayment they will not have to repay the loan. Such people need to be especially sensitized and explain the risks they take.
Loans with guarantors and loans with guarantors are not new or particularly innovative solutions, which does not mean that they are not worth knowing. Many people give up credit applications right away because of their low credit standing or poor credit history. In this case, you should suggest such a solution and give the customer a choice of presenting all the pros and cons of such a loan. It is therefore worth being aware of the possibilities and giving potential borrowers a choice, and leave the decision to them and the potential guarantor.